Resolving a bond is quite possible, but you will probably have to pay something called interest rate compensation to compensate the lender.

The fact that you have to pay this has to do with the lender himself borrowing money to be able to lend the same amount to you. They then borrow this money at the same time as you have as a binding period.

They will incur costs in the future if you settle your tied loan early.

They will incur costs in the future if you settle your tied loan early.

Therefore, in order for the lender not to make a loss, they will charge a fee that is supposed to cover their costs that your bond loan entails for them. However, this fee should not pay anything other than the costs that they themselves have to borrow, it should not cover their loss of profits.

Is it profitable to settle a bond?

Is it profitable to settle a bond?

It is very difficult to say whether it is profitable or not as it requires that in the future you know whether this money that it would have cost extra instead could have been invested more efficiently. For example, the stock exchange has historically gone up about 10% per year, which would result in higher income than the interest cost. But then there is always the risk that it will not go well at all and then it would have been worth repaying the loan in advance although extra costs are added. Undoubtedly, it is a safer investment to pay off a loan, which is a clear advantage.

Therefore, we cannot say an exact answer to you, but the tip is to contact the lender and look up what it might cost to repay the money. Then you simply have to sit down and wonder if it is the right way to go or not for you.

Leave a comment

Your email address will not be published. Required fields are marked *